Good Medicine For Drillers-iodine

October 09, 1989|By Arnold Hamilton, Dallas Morning News.

OKLAHOMA CITY — The numbers are a stark reminder of the despair in Oklahoma`s energy industry: The rig count plunged to a 17-year low in June. Well completions are down nearly 32 percent from last year. And applications for drilling permits tumbled 22 percent in the first six months of the year.

But, out on the northwestern Oklahoma prairie, a drilling boom is underway that may have been overlooked by the traditional barometers of industry activity-a boom that has kept some drilling contractors working around-the-clock for months.

In this case, the more than 45 wells that have been drilled in recent years have nothing to do with oil and gas. Instead, the chemical of choice is iodine, harvested from the once universal scourge of energy producers: salt water.

``It`s a good diversification,`` said Bill Beard, chairman of Oklahoma City-based Beard Oil Co., which branched into iodine production about six years ago and soon will open a second plant.

``The iodine is definitely a hedge. It doesn`t have anything to do with the price of oil and gas,`` Beard said.

With energy prices low and skepticism about a quick turnaround high, an increasing number of energy companies are reviewing the economic potential of extracting chemicals that once were nothing more than a nuisance.

For example, Okmulgee, Okla.-based Viersen & Cochran Drilling Co. not only has drilled 10 iodine wells in northwestern Oklahoma but it also has been approached about drilling for magnesium in eastern Oklahoma.

According to several energy companies, the diversification into iodine has not meant the difference between prosperity and bankruptcy. But in some cases, it has eased the lean times in the oil and gas business by keeping rigs drilling and giving energy firms another potential source of income.

``Some of these wells are being drilled where there was a dry hole or where a gas field has been exhausted,`` said Roy Hisel, vice president of Viersen & Cochran. ``They`re getting a second chance.``

Northwestern Oklahoma emerged as a potential major source of iodine about 15 years ago when research by Ethyl Corp. discovered high concentrations of the chemical in the salt water in the Morrowan Formation near Woodward.

By 1977, Amoco Production Co. and PPG Industries opened the area`s first plant, Woodward Iodine Corp. The operation was purchased in 1984 by two Japanese companies, Ise Chemical Co. and Asahi Glass Co.

Three years later, with the worldwide price of iodine increasing, IoChem Corp. began production at a plant near Vici, Okla.

And now, North American Brine Resources, partly owned by Beard Oil, is scheduled to open a plant north of Woodward in two weeks.

North American also operates a plant near Kingfisher, Okla., which extracts iodine from brine as a byproduct of producing oil and gas wells.

The arrival of iodine production plants in northwestern Oklahoma has produced a drilling boom and helped establish the U.S. (and Oklahoma, in particular) as one of the world`s key iodine producers.

According to drillers and producers in the area, the iodine companies have drilled more than 45 wells, many ranging from about 6,000 to 10,500 feet. Dick Cook, president and chief executive of Woodward Iodine, said his firm operates about 33 wells in the area. By contrast, IoChem reported that it has drilled 10 wells of about 10,000 feet each. And North American already has drilled two producing and two injection wells in anticipation of the opening of its new plant.

Cook said interest in northwestern Oklahoma iodine jumped about the time energy prices plunged-largely because the world`s largest iodine producers, the Japanese, found it more economical to produce here than at home.